The Results of the FATF's Country Review: A "Deficient" for Germany?
On August 25, the Financial Action Task Force (abbreviated to "FATF") published the results of the Germany Review, in which anti-money laundering and counter-terrorist financing measures are reviewed and evaluated. The so-called Mutual Evaluation Report (in short: "MER") sets out the effectiveness of the anti-money laundering measures and highlights the areas where there is still room for improvement for Germany.
We have summarized the key findings of the final report for you below.
- Need for improvement in the non-financial sector: The FATF criticizes the fact that the more than 300 competent money laundering supervisory authorities in the non-financial sector are inadequately staffed and lack coordination in their actions. In addition, risk awareness with regard to money laundering in the non-financial sector is still insufficient in some cases.
- Unsatisfactory information in the transparency register: The FATF criticizes the fact that the transparency register, which provides full access to information on beneficial owners, sometimes contains information that is not up to date and not verified. There is a need for improvement in the availability and reliability of the data in the transparency register.
- Lack of Data and Use of Data: The FATF stated that there is a lack of robust data at federal and state agencies that is necessary for effective anti-money laundering and effective measurement of the effectiveness of measures. There is also a significant need for improvement across all relevant agencies, particularly the FIU and law enforcement, with respect to the development and use of financial information.
- Inadequate prioritization of money laundering investigation and prosecution: In the MER, the FATF makes clear that the processing of suspicious cases and investigations are too slow and inefficient. In this regard, the processes at the FIU need to be made more efficient, particularly through the use of AI or other advanced analytical tools. Money laundering investigations and prosecutions need to be prioritized more, he said. There is also a shortage of staff at the law enforcement agencies, which is the reason for inadequate prosecution, including only a small number of convictions for money laundering offenses.
- Noticeable improvement in the financial sector: Finally, the FATF also had a few words of praise for the financial sector in particular. Improvements in the fight against money laundering and the prevention of terrorist financing are evident. The banking sector had a good understanding of money laundering risks. The supervisory practices of BaFin and the newly created Anti Financial Crime Alliance (AFCA) were also praised.
In summary, Germany has made recognizable progress in combating money laundering and terrorist financing since the last FATF audit ten years ago, and this progress has been acknowledged and praised by the FATF. Nevertheless, there is still much room for improvement overall. In order to receive a good score in the next FATF audit, Germany can and must continue to make efforts in the fight against money laundering.
As a first step in the right direction, German Finance Minister Christian Lindner already presented a new initiative: A new higher federal authority is to be created to ensure coordination of supervisory activities in the non-financial sector, as well as to help with more effective sanctions enforcement. CURENTIS will report on further developments.